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SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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<S> <C>
/ / Preliminary Information Statement / / Confidential, for Use of the Commission
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iMALL, INC.
4400 COLDWATER CANYON BOULEVARD, SUITE 200
STUDIO CITY, CALIFORNIA 91604
INFORMATION STATEMENT
(DATED OCTOBER 17, 1997)
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ACTIONS, DEFINED BELOW, HAVE ALREADY BEEN APPROVED BY WRITTEN CONSENT
OF HOLDERS OF A MAJORITY OF THE COMPANY'S OUTSTANDING COMMON STOCK. A VOTE OF
THE REMAINING SHAREHOLDERS IS NOT NECESSARY.
GENERAL
This Information Statement is first being furnished on or about October 20,
1997 to shareholders of record as of the close of business on October 15, 1997
(the "Record Date") of the Common Stock, $.001 par value per share (the "Common
Stock") of iMall, Inc., a Nevada corporation (the "Company"), in connection with
the following (collectively, the "Actions"):
1. to amend the Articles of Incorporation to authorize up to
10,000,000 shares of Preferred Stock;
2. to effect an up to 1-for-10 reverse stock split; and
3. to approve the Company's 1997 Stock Option Plan.
The Board of Directors has approved, and a total of three shareholders (the
"Consenting Shareholders") representing 39,000,000 shares (approximately 65.11%)
of the 61,793,129 shares outstanding of the Common Stock as of October 8, 1997
have consented in writing, to the Actions. Such approval and consent are
sufficient under the Nevada General Corporation Law and the Company's By-Laws to
approve the Actions. Accordingly, the Actions will not be submitted to the other
shareholders of the Company for a vote and this Information Statement is being
furnished to shareholders solely to provide them with certain information
concerning the Actions in accordance with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the regulations
promulgated thereunder, including Regulation 14C.
This Information Statement contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
FOR ADDITIONAL INFORMATION ABOUT THE COMPANY, REFERENCE IS MADE TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM 10-SB.
The principal executive offices of the Company are located at 4400
Coldwater Canyon Boulevard, Suite 200, Studio City, California 91604.
<PAGE> 3
AMENDMENT TO THE CERTIFICATE
OF INCORPORATION TO AUTHORIZE UP TO 10,000,000
SHARES OF PREFERRED STOCK
The Board of Directors has unanimously adopted and the Consenting
Shareholders have approved an amendment to the Articles of Incorporation (the
"Preferred Stock Amendment") to authorize the issuance by the Company of up to
10,000,000 shares of preferred stock (the "Preferred Stock"). The text of the
Preferred Stock Amendment is attached as Exhibit A and is incorporated herein by
reference.
REASONS FOR THE AMENDMENT
The Board of Directors believes that the authorization of the Preferred
Stock is in the best interests of the Company and its shareholders and believes
that it is advisable to authorize such shares and have them available in
connection with possible future transactions, such as the private placement
described in the next paragraph, strategic alliances, corporate mergers,
acquisitions, possible funding of new product programs or businesses and other
uses not presently determinable and as may be deemed to be feasible and in the
best interests of the Company. In addition, the Board of Directors believes that
it is desirable that the Company have the flexibility to issue shares of
Preferred Stock without further shareholder action, except as otherwise provided
by law.
PRIVATE PLACEMENT
The Company is currently conducting a private placement (the "Private
Placement") of up to 2,000,000 shares (the "Preferred Shares") of Convertible
Preferred Stock (the "Convertible Preferred Stock") and warrants ("Warrants") to
purchase up to 5,000,000 shares of the Company's Common Stock for $.40 per share
(All per share numbers are on a pre-reverse stock split basis). The offering is
in units ("Units") at a price of $100,000 per Unit, each Unit consisting of
25,000 Preferred Shares and 62,500 Warrants which will be immediately detachable
and separately transferable. The Company has appointed Commonwealth Associates
as its exclusive placement agent for the Units. As the present Articles of
Incorporation do not authorize the issuance of any preferred stock, in order to
complete the Private Placement as presently contemplated, the Articles of
Incorporation of the Company must be amended to authorize the issuance of
Preferred Stock.
Pursuant to the Private Placement as presently contemplated, each Preferred
Share is entitled to receive dividends on a semi-annual basis, when and as
declared by the Company's Board of Directors, at the rate of 9% per annum in
preference to any payment made on any shares of Common Stock (the "Common
Shares") or on any other class or series of capital stock of the Company ranking
junior to the Convertible Preferred Stock. Any dividend payable on the Preferred
Shares will be paid, at the option of the Company, in cash or in additional
Preferred Shares. Each Preferred Share is also entitled to a liquidation
preference of $4.00 per share, plus any accrued but unpaid dividends, in
preference to any other class or series of capital stock of the Company, other
than the Preferred Shares or any other class or series of capital stock which is
entitled to priority over the Convertible Preferred Stock. The holders of the
Convertible Preferred Shares are entitled to cast a number of votes equal to the
number of shares of Common Stock into which such Shares could then be converted.
At any time after the issuance of the Convertible Preferred Stock, any holder of
the Convertible Preferred Stock may convert a Preferred Share into ten Common
Shares reflecting a conversion price of $.40 per share (the "Conversion Price")
(subject to adjustment upon the occurrence certain events including stock
dividends, corporate reorganizations, stock splits etc.).
If the Common Shares issuable upon conversion of the Convertible Preferred
Stock have been registered under the Securities Act of 1933, as amended, the
Company may call for redemption of the Preferred Shares upon 30 days notice at
any time after 18 months from the final closing of the Private Placement (the
"Closing") during the five year period following the Closing, provided that the
Company's Common Stock has traded for the 30 trading day period prior to the
date of notice at or above one dollar per share (as such price may be adjusted
based upon certain events including stock dividends, corporation
reorganizations, stock splits, etc.).
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In the event that the market price of the Company's Common Stock during the
18-month period after the Closing is less than $.40 per share, the Conversion
Price will be adjusted automatically to such market price with respect to all
shares of Common Stock issuable upon any then unexercised Convertible Preferred
Stock.
The above description is based upon the current structure of the Private
Placement. It is possible that the terms of the Private Placement and any
capital stock issued thereunder could change in a material manner, including
that the Private Placement would not include Preferred Stock. Additionally, no
assurance can be given that the Private Placement will be consummated, or if it
is, the timing thereof.
EFFECT OF THE AMENDMENT
The Preferred Stock issued as a result of the Preferred Stock Amendment
will have such designations, preferences, conversion rights, cumulative,
relative, participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as are determined by the
Board of Directors. Upon the Preferred Stock Amendment being filed, the Board of
Directors would be entitled to authorize the creation and issuance of up to
10,000,000 shares of Preferred Stock in one or more series with such limitations
and restrictions as may be determined in the Board's sole discretion, without
further authorization by the Company's shareholders. Shareholders will not have
preemptive rights to subscribe for shares of Preferred Stock. If the Private
Placement is consummated on the terms described above, the Board will have the
authority to designate a series of Preferred Stock containing such terms or any
different terms as finally determined.
It is not possible to determine the actual effect of the Preferred Stock on
the rights of the shareholders of the Company until the Board of Directors
determines the rights of the holders of a series of the Preferred Stock.
However, such effects might include (i) restrictions on the payment of dividends
to holders of the Common Stock; (ii) dilution of voting power to the extent that
the holders of shares of Preferred Stock are given voting rights; (iii) dilution
of the equity interests and voting power if the Preferred Stock is convertible
into Common Stock; and (iv) restrictions upon any distribution of assets to the
holders of the Common Stock upon liquidation or dissolution and until the
satisfaction of any liquidation preference granted to the holders of Preferred
Stock.
The Board of Directors is required by Nevada law to make any determination
to issue shares of Preferred Stock based upon its judgment as to the best
interests of the Shareholders and the Company. Although the Board of Directors
has no present intention of doing so, it could issue shares of Preferred Stock
(within the limits imposed by applicable law) that could, depending on the terms
of such series, make more difficult or discourage in an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest or
other means. When in the judgment of the Board of Directors such action would be
in the best interests of the shareholders and the Company, the issuance of
shares of Preferred Stock could be used to create voting or other impediments or
to discourage persons seeking to gain control of the Company, for example, by
the sale of Preferred Stock to purchasers favorable to the Board of Directors.
In addition, the Board of Directors could authorize holders of a series of
Preferred Stock to vote either separately as a class or with the holders of
Common Stock on any merger, sale or exchange of assets by the Company or any
other extraordinary corporate transaction. The existence of the additional
authorized shares could have the effect of discouraging unsolicited takeover
attempts. The issuance of new shares could also be used to dilute the stock
ownership of a person or equity seeking to obtain control of the Company should
the Board of Directors consider the action of such entity or person not to be in
the best interests of the shareholders and the Company. Such issuance of
Preferred Stock could also have the effect of diluting the earnings per share
and book value per share of the Common Stock held by the holders of the Common
Stock.
While the Company may consider effecting an equity offering of Preferred
Stock in the future for the purposes of raising additional working capital or
otherwise, the Company, except as set forth above with regard to the Private
Placement, as of the date hereof has no agreements or understandings with any
third party to effect any such offering and no assurances are given that any
offering will in fact be effected.
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DISSENTER'S RIGHTS
Pursuant to the Nevada General Corporation Law, the Company's shareholders
are not entitled to dissenters' rights of appraisal with respect to the
Preferred Stock Amendment.
REVERSE STOCK SPLIT
The Board of Directors has authorized and the Consenting Shareholders have
approved an amendment to the Articles of Incorporation (the "Reverse Stock Split
Amendment") with respect to an up to 1:10 reverse stock split (the "Reverse
Stock Split") of the issued and outstanding shares of the Company's Common Stock
to be effective as and when determined by the Board of Directors (the "Effective
Date"). The exact amount of the Reverse Split will also be determined by the
Board of Directors.
GENERAL
Upon the Effective Date, the Reverse Stock Split will be deemed effective,
and each certificate representing shares of Common Stock outstanding immediately
prior to the Reverse Stock Split (the "Old Shares") will be deemed
automatically, without any action on the part of the shareholders, to represent
up to 1/10 (with the exact amount to be determined by the Board of Directors) of
the number of shares of Common Stock after the Reverse Stock Split (the "New
Shares"); provided, however, that no fractional New Shares will be issued as a
result of the Reverse Split. In lieu of such fractional interest, a shareholder
will receive cash equal to the average closing prices of the Common Stock for
the three trading days following the Effective Date multiplied by the fractional
interest. After the Reverse Split becomes effective, shareholders will be asked
to surrender certificates representing Old Shares in accordance with the
procedures set forth in a letter of transmittal to be sent by the Company. Upon
such surrender, a certificate representing the New Shares will be issued
(together with cash for any fractional interest) and forwarded to the
shareholders. However, each certificate representing Old Shares will continue to
be valid and represent New Shares equal to up to 1/10 the number of Old Shares.
PURPOSES OF THE PROPOSED REVERSE SPLIT
The Reverse Stock Split is to be effected for several reasons. The Reverse
Stock Split should enhance the acceptability of the Common Stock by the
financial community and investing public. The reduction in the number of issued
and outstanding shares of Common Stock caused by the Reverse Stock Split is
expected to increase the market price of the Common Stock. The Board of
Directors also believes that the proposed Reverse Stock Split will result in a
broader market for the Common Stock than that which currently exists. A variety
of brokerage house policies and practices tend to discourage individual brokers
within those firms from dealing with lower priced stocks. Some of those policies
and practices pertain to the payment of broker's commissions and to the
procedures that function to make the handling of lower priced stock economically
unattractive to brokers. In addition, the structure of trading commissions also
tends to have an adverse impact upon holders of lower priced stock because the
brokerage commission on a sale of lower priced stock generally represents a
higher percentage of the sales price than the commission of a relatively higher
priced issue. The Reverse Stock Split may result in a price level for the Common
Stock that will reduce, to some extent, the effect of the above-referenced
policies and practices of brokerage firms and diminish the adverse impact of
trading commissions on the market for the Common Stock. The expected increased
price level may also encourage interest and trading in the Common Stock and
possibly promote greater liquidity for the Company's shareholders.
Currently, the Company's shares of Common Stock are traded on the OTC
Electronic Bulletin Board. The Board of Directors believes that the Reverse
Stock Split may be of assistance in the Company's efforts to meet the initial
listing application requirements maintained by NASDAQ for its SmallCap Market.
However, there can be no assurance that any or all of these effects will
occur; including, without limitation, that the market price per New Share Common
Stock after the Reverse Stock Split will be up to ten times the market price of
an Old Share of Common Stock before the Reverse Stock Split, or that such price
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will either exceed or remain in excess of the current market price. Further,
there is no assurance that the market for the Common Stock will be improved.
Shareholders should note that the Board of Directors cannot predict what effect
the Reverse Stock Split will have on the market price of the Common Stock.
IMPLEMENTATION OF REVERSE STOCK SPLIT
The Reverse Stock Split will be effected by filing the Reverse Stock Split
Amendment to the Articles of Incorporation with the Nevada Secretary of State.
Upon the effectiveness of the filing, without any further action on the part of
the Company or the shareholders, after the Effective Date, the certificates
representing Old Shares will be deemed to represent up to 1/10 of the number of
New Shares (exclusive of any fractional interest).
As soon as practicable after the Effective Date, the Company will send a
letter of transmittal to each holder of record of Old Shares of Common Stock
outstanding on the Effective Date. The letter of transmittal will contain
instructions for the surrender of certificate(s) representing such Old Shares to
Signature Stock Transfer, Inc., the Company's exchange agent (the "Exchange
Agent"). Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with the certificate(s)
representing Old Shares, a shareholder will be entitled to receive a certificate
representing the number of New Shares of Common Stock into which his Old Shares
have been reclassified and changed as a result of the Reverse Stock Split and
cash for any fractional share interest.
Shareholders should not submit any certificates until requested to do so.
No new certificates will be issued to a shareholder until he has surrendered his
outstanding certificate(s) together with the properly completed and executed
letter of transmittal to the Exchange Agent.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
The Company has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Stock Split. The Company, however, believes that
because the Reverse Stock Split is not part of a plan to periodically increase a
shareholder's proportionate interest in the assets or earnings and profits of
the Company, the Reverse Stock Split will have the following federal income tax
effects:
1. Except to the extent of the cash received for any fractional
interest, a shareholder will not recognize gain or loss on the exchange. In
the aggregate, the shareholder's basis in the New Shares will equal his
basis in the Old Shares.
2. A shareholder's holding period for the New Shares will be the same
as the holding period on the Old Shares exchanged therefor.
3. The Reverse Stock Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as
amended, and the Company will not recognize any gain or loss as a result of
the Reverse Stock Split.
APPROVAL OF THE 1997 STOCK OPTION PLAN
Effective January 31, 1997, the Board of Directors (the "Board") adopted
the 1997 Stock Option Plan (the "Plan"), subject to shareholder approval.
The following summary describes the material features of the Plan.
PURPOSE
The purpose of the Plan is to provide additional incentive to those
officers, directors and key employees and consultants of the Company whose
substantial contributions are essential to the continued growth and success of
the Company's business in order to strengthen their commitment to the Company,
to motivate such officers, directors, consultants and employees to faithfully
and diligently perform their assigned responsibilities
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and to attract and retain competent and dedicated individuals whose efforts will
result in the long-term growth and profitability of the Company.
COMMON STOCK AVAILABLE
Subject to adjustment as described below, the maximum number of shares of
Common Stock which may be awarded under the Plan may not exceed an aggregate of
6,000,000 shares over the life of the Plan. The Plan provides for equitable
adjustment of the number of shares subject to the Plan and the number of shares
of each subsequent award of stock thereunder and of the unexercised portion of
the stock option award described below in the event of a change in the
capitalization of the Company due to a stock split, stock dividend,
recapitalization, merger or similar event.
ELIGIBILITY
Persons who are eligible to receive stock options granted under the Plan
are those individuals and entities as the Compensation Committee or such other
committee appointed by the Board of Directors to administer the Plan (the
"Committee") in its discretion determines should be awarded such incentives
given the best interest of the Company; provided, however, that incentive stock
options ("ISOs") may only be granted to employees of the Company and its
affiliates. Additionally, any person holding capital stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or
any affiliate are not eligible to receive ISOs unless the exercise price per
share is at least 110% of the fair market value of the stock on the date the
option is granted.
ADMINISTRATION
The authority to control and manage the operation and administration of the
Plan is vested in the Committee appointed by the Board from time to time.
Members of the Committee shall serve at the pleasure of the Board of Directors.
The Committee may from time to time determine which employees of the Company or
its affiliates or other individuals or entities may be granted options under the
Plan, the terms thereof (including, without limitation, determining whether the
option is an ISO and the times at which the option shall become exercisable),
and the number of shares for which an option or options may be granted. If
rights of the Company to repurchase stock are imposed, the Board or the
Committee may, in its sole discretion, accelerate, in whole or in part, the time
for lapsing of any rights of the Company to repurchase shares or forfeiture
restrictions. The Board or the Committee has the sole authority, in its absolute
discretion, to adopt, amend and rescind such rules and regulations, consistent
with the provisions of the Plan, as, in its opinion, may be advisable in the
administration of the Plan, to construe and interpret the Plan, the rules and
regulations, and the instruments evidencing options granted under the Plan and
to make all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations and interpretations of
the Committee are binding on all option holders under the Plan.
GRANT AND EXERCISE OF OPTIONS
All ISOs will have option exercise prices per option share not less than
the fair market value of a share on the date the option is granted, except in
the case of ISOs granted to any person possessing more than 10% of the total
combined voting power of all classes of stock in which case the price will be
not less than 110% of such fair market value. The term of each option may not be
more than 10 years, except that the term of each ISO issued to any person
possessing more than 10% of the voting power of all classes of stock may not be
more than five years.
The vesting schedule for any option granted under the Plan, will be
determined by the Board or the Committee and will be set forth in a specific
option agreement. To the extent not exercised, installments will accumulate and
be exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the option expires. The Committee has the right to
accelerate the exercisability of any option.
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Each ISO granted pursuant to the Plan is exercisable, during the optionee's
lifetime, only by the optionee or the optionee's guardian or legal
representative. Neither the option nor any right to purchase stock may be
transferred, assigned or pledged other than by will under the laws of descent
and distribution.
Payment of the purchase price is by cash or check, or, at the discretion of
the Committee, by transfer of shares or pursuant to a cashless exercise feature.
The Committee may, in its discretion, assist any option holder in the
exercise of options granted under the Plan, including the satisfaction of any
tax arising therefrom by (i) authorizing the extension of the loans from the
Company, (ii) permitting the option holder to pay the exercise price in
installments or (iii) authorizing a guaranty by the Company of a third party
loan to the option holder.
AMENDMENT AND TERMINATION
The Board may at any time suspend or terminate the Plan, and may amend it
from time to time in such respects as the Board may deem advisable. Unless
terminated by the Board earlier, the Plan shall terminate on the earlier of
January 31, 2007.
As of October 1, 1997, options for the purchase of 846,540 shares were
outstanding by 67 employees.
MARKET VALUE OF UNDERLYING SECURITIES
On October 9, 1997, the closing bid price for the Company's Common Stock on
the OTC Bulletin Board was $.5625.
FEDERAL INCOME TAX INFORMATION
Under the terms of the Plan, options may be granted as either ISOs under
Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code") and
the regulations thereunder or non-incentive stock options ("NSOs"). In general,
an optionee does not recognize taxable income upon grant or exercise of an ISO
and the Company is not entitled to any business expense deduction with respect
thereto. However, upon the exercise of an ISO, the excess of the fair market
value on the date of exercise of the shares received over the exercise price of
the shares is treated as an item of adjustment for purpose of calculating
alternative minimum taxable income. In order for the exercise of an ISO to
qualify for the foregoing tax treatment, the optionee generally must be an
employee of the Company or a subsidiary (within the meaning of Section 422 of
the Code) from the date the ISO is granted through the date three months before
the date of exercise (one year before the date of exercise in the case of an
optionee who is terminated due to disability).
If the optionee has held the shares acquired upon exercise of an ISO for at
least two years after the date of grant and for at least one year after the date
of exercise, upon disposition of the shares by the optionee, the difference, if
any, between the sales price of the shares and the exercise price of the option
is treated as long-term capital gain or loss. If the optionee does not satisfy
these ISO holding period requirements (a "Premature Disposition"), the optionee
will recognize ordinary income at the time of the disposition of the shares,
generally in an amount equal to the excess of the fair market value of the
shares at the time the option was exercised over the exercise price of the
option. The balance of the gain realized, if any, will be long-term or
short-term capital gain, depending on the holding period. If the optionee sells
the shares prior to the satisfaction of the ISO holding period requirements, but
at a price below the fair market value of the shares at the time the option was
exercised, the amount of ordinary income is limited to the amount realized on
the sale over the exercise price of the option. Upon a Premature Disposition,
the Company and its subsidiaries is allowed a business expense deduction to the
extent the optionee recognizes ordinary income.
In general, an optionee to whom a NSO is granted recognizes no income at
the time of the grant of the option. Upon exercise of a NSO, an optionee
recognizes ordinary income and the Company is entitled to a deduction in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option. The Company's deduction is
conditioned upon its reporting the income amount.
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The foregoing summary of the Plan is subject to the provisions of the Plan
which is included as Appendix A to this Proxy Statement.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
PERSONS ENTITLED TO NOTICE
The record dates for the determination of the shareholders entitled to
notice of and to consent to the Actions has been fixed as of the close of
business on October 15, 1997. As of the October 8, 1997, there were outstanding
61,793,129 shares of Common Stock, each of which is entitled to one vote.
Since the Actions have been duly approved by the Consenting Shareholders
holding a majority of the outstanding Common Stock, approval or consent of the
remaining shareholders is not required and is not being solicited hereby or by
any other means.
PRINCIPAL SHAREHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company as
of October 8, 1997 with respect to the beneficial ownership of the outstanding
shares of the Common Stock by the Company's directors and executive officers and
the directors and executive officers of the Company as a group. The Company is
aware of no shareholders other than certain directors and executive officers of
the Company who beneficially own more than five percent of the outstanding
shares of the Company's common stock. Each person listed below has personal and
sole beneficial ownership of the shares of common stock listed with their name.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER SHARES PERCENTAGE(1)
------------------------------------------------- ---------- -----------
<S> <C> <C>
Craig R. Pickering............................... 13,000,000 21.0%
1185 South Mike Jense Circle
Provo, Utah 84601
Richard Rosenblatt............................... 13,000,000 21.0%
4400 Coldwater Canyon Blvd.
Suite 200
Studio City, California 91604
Mark R. Comer.................................... 13,000,000 21.0%
4400 Coldwater Canyon Blvd.
Suite 200
Studio City, California 91604
Stephen Fulling.................................. 0 0.0%
1185 South Mike Jense Circle
Provo, Utah 84601
Martin Rosenblatt................................ 1,353,333 2.2%
4400 Coldwater Canyon Blvd.
Suite 200
Studio City, California 91604
Craig Lewis...................................... 15,500 0.1%
1185 South Mike Jense Circle
Provo, Utah 84601
David M. Rees.................................... 0 0.0%
1185 South Mike Jense Circle
Provo, Utah 84601
Total of Directors and Executive Officers
as a group (7 persons)......................... 40,368,833 65.3%
</TABLE>
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(1) Based on 61,793,129 shares of common stock outstanding as of October 8,
1997.
By Order of the Board of Directors
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EXHIBIT A
ARTICLE IV of the Articles of Incorporation of the Company shall be amended
to read as follows:
The total authorized capitalization of this Corporation shall be
300,000,000 shares of Common Stock par value of $.001 per share and
10,000,000 shares of Preferred Stock par value of $.001 per share.
The shares of preferred stock authorized hereby may, when authorized
for issuance by the Board of Directors of this corporation, be issued in
series having such designations, powers, preferences, rights and
limitations, and on such terms and conditions as the Board of Directors may
from time to time determine including the rights, if any, of the holders
thereof with respect to voting, dividends, redemption, liquidation and
conversion.
A-1
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EXHIBIT B
IMALL, INC.
1997 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Plan is to provide additional incentive to
those directors, officers, and key employees and consultants of the Company
whose substantial contributions are essential to the continued growth and
success of the Company's business in order to strengthen their commitment to the
Company, to motivate such directors, officers, and employees and consultants to
faithfully and diligently perform their assigned responsibilities and to attract
and retain competent and dedicated individuals whose efforts will result in the
long-term growth and profitability of the Company. To accomplish such purposes,
the Plan provides that the Company may grant Incentive Stock Options or
Nonqualified Stock Options.
2. DEFINITIONS. For purposes of this Plan:
(a) "Agreement" means the written agreement evidencing the grant of an
Option setting forth the terms and conditions thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means, unless otherwise defined in the particular Agreement
evidencing the grant of an Option or an employment agreement covering the
Optionee, (i) the willful neglect or refusal to perform the Optionee's duties or
responsibilities or the willful taking of actions which materially impair the
Optionee's ability to perform the Optionee's duties or responsibilities which
continues after being brought to the attention of the Optionee (other than any
such failure resulting from the Optionee's incapacity due to physical or mental
illness) or (ii) the willful act or failure to act by the Optionee which is
materially injurious to the Company.
(d) "Change in Capitalization" means any increase, reduction, or change or
exchange of Shares for a different number or kind of shares or other securities
of the Company by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, issuance of warrants or rights, stock dividend,
stock Split or reverse stock split, combination or exchange of shares,
repurchase of shares, change in corporate structure or otherwise.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the Compensation Committee of the Board or such other
committee appointed by the Board to administer the Plan and to perform the
functions set forth herein.
(g) "Company" means iMall, Inc., a Nevada corporation.
(h) "Eligible Employee" means any director, officer or key employee or
consultant of the Company designated by the Committee as eligible to receive
Options subject to the conditions set forth herein.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(j) "Fair Market Value" means the fair market value of the Shares as
determined by the Committee in its sole discretion; provided, however, that (A)
if the Shares are admitted to trading on a national securities exchange, Fair
Market Value on any date shall be the last sale price reported for the Shares on
such exchange on such date or on the last date preceding such date on which a
sale was reported, (B) if the Shares are admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or other
comparable quotation system and have been designated as a National Market System
("NMS") security, Fair Market Value on any date shall be the last sale price
reported for the Shares on such system on such date or on the last day preceding
such date on which a sale was reported, or (C) if the Shares are admitted to
quotation on NASDAQ and have not been designated a NMS security, Fair Market
Value on any date shall be the average of the highest bid and lowest asked
prices of the Shares on such system on such date.
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(k) "Incentive Stock Option" means an Option within the meaning of Section
422 of the Code.
(l) "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
(m) "Option" means at Incentive Stock Option, a Nonqualified Stock Option,
or either or both of them, as the context requires.
(n) "Optionee" means a person to whom an Option has been granted under the
Plan.
(o) "Parent" means any corporation in an unbroken chain of corporations
ending with the Company, if each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock of one of the other corporations in such chain.
(p) "Plan" means the iMall, Inc. 1997 Stock Option Plan, as amended from
time to time.
(q) "Securities Act" means the Securities Act of 1933, as amended.
(r) "Shares" means of the common stock, par value $.001 per share of the
Company (including any new, additional or different stock or securities
resulting from a Change in Capitalization).
(s) "Ten-Percent Stockholder" means an Eligible Employee, who, at the time
an Incentive Stock Option is to be granted to such Eligible Employee, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company, a Parent or a Subsidiary within the meaning of Sections 422(e) and
422(f), respectively, of the Code.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A majority of the
Committee shall constitute a quorum and a majority of a quorum may authorize any
action. Any decision reduced to writing and signed by a majority of the members
of the Committee shall be fully effective as if it had been made at a meeting
duly held. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
Options, and all members of the Committee shall be fully indemnified by the
Company with respect to any such action, determination or interpretation. The
Company shall pay all expenses incurred in the administration of the Plan.
(b) Subject to the express terms and conditions set forth herein, the
Committee shall have the power firm time to time:
(i) to determine those Eligible Employees to whom Options shall be
granted under the Plan and the number of Nonqualified Options and/or
Incentive Stock Options to be granted to each Eligible Employee and to
prescribe the terms and conditions (which need not be identical) of each
Option including the purchase price per Share of each Option;
(ii) to construe and interpret the Plan and the Options granted
hereunder and to establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the
Plan or in any Agreement, in the manner and to the extent it shall deem
necessary or advisable to make the Plan fully effective, and all decisions
and determinations by the Committee in the exercise of this power shall be
final and binding upon the Company and the Optionees, as the case may be:
(iii) to determine the duration and purposes for leaves of absence
which may be granted to an Optionee without constituting a termination of
employment or service for purposes of the Plan; and
(iv) generally, to exercise such powers and to perform such acts as
are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
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4. STOCK SUBJECT TO PLAN.
(a) The maximum number of Shares that may be issued or transferred pursuant
to Options is 6,000,000 (or the number and kind of share of stock or other
securities which are substituted for those Shares or to which those Shares are
adjusted upon a Change in Capitalization), and the Company shall reserve for the
purposes of the Plan, out of its authorized but unissued Shams or out of Shares
held in the Company's treasury, or partly out of each, such number of Shares as
shall be determined by the Board.
(b) Whenever any outstanding Option or portion thereof expires, is
cancelled or is otherwise terminated (other than by exercise of the Option), the
Shares allocable to the unexercised portion of such Option may again be the
subject of Options hereunder.
5. ELIGIBILITY. Subject to the provisions of the Plan, the Committee shall
have full and final authority to select those Eligible Employees who will
receive Options.
6. OPTIONS. The Committee may grant Options in accordance with the Plan,
the terms and conditions of which shall beset forth in an Agreement. Each Option
and Agreement shall be subject to the following conditions:
(a) Purchase Price. The purchase price or the manner in which the purchase
price is to be determined for Shares under each Option shall be set forth in the
Agreement; provided, however, in the case of an Incentive Stock Option the
purchase price per Share under the Option shall not be less than 100% of the
Fair Market Value of a Share at the time the Option is granted (110% of the Fair
Market Value of a Share at the time the Option is granted in the case of an
Incentive Stock Option granted to a Ten-Percent Stockholder).
(b) Duration. Options granted hereunder shall be for such term as the
Committee shall determine, provided that no Option shall be exercisable after
the expiration of ten (10) years from the date it is granted (five (5) years in
the case of an Incentive Stock Option granted to a Ten-Percent Stockholder). The
Committee may, subsequent to the granting of any Option, extend the term thereof
but in no event shall the term as so extended exceed the maximum term provided
for in the preceding sentence.
(c) Transferability.
(i) Subject to Section (c)(ii), no Option issued under the Plan shall
be assignable or transferable by an Optionee other than by will or the laws
of descent and distribution. An Option awarded to an Optionee during such
Optionee's lifetime shall be exercisable only by an Optionee or his or her
guardian or legal representative.
(ii) Notwithstanding Section (c)(i), in the case of a Nonstatutory
Stock Option, an Optionee shall be permitted to transfer the Option to the
Optionee's spouse, adult lineal descendants, adult spouses of adult lineal
descendants and trusts for the benefit of the Optionee's minor or adult
lineal descendants (a "Related Transferee") if the Option Agreement under
which the Option is granted so specifies. If the Option is transferred to a
Related Transferee pursuant to the preceding sentence, the Related
Transferee shall, upon exercise of the Option, hold the Option Stock
subject to all the provisions of the transferor's Option Agreement in the
same manner as the transferor and shall execute and deliver to the Company
such instruments as the Company shall require to evidence the same.
(d) Vesting. The terms pertaining to the exercise of Options shall be as
determined by the Committee and the Committee may accelerate the exercisability
of any Option or portion thereof at any time.
(e) Termination of Employment. Unless otherwise set forth in the Agreement,
in the event that an Optionee ceases to be employed by the Company, any
outstanding Options held by such Optionee shall, unless the Agreement evidencing
such option provides otherwise, terminate as follows:
(i) If the Optionee's termination of employment is due to his death,
disability or, in the case of a Nonqualified Stock Option, retirement, the
Option (to the extent exercisable at the time of the Optionee's termination
of employment) shall be exercisable for a period of one (1) year following
such termination of employment, and shall thereafter terminate;
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(ii) If the Optionee's termination of employment is by the Company for
Cause, the Option shall terminate on the date of the Optionee's termination
of employment; and
(iii) If the Optionee's termination of employment is for any other
reason, the Option (to the extent exercisable at the time of the Optionee's
termination of employment) shall be exercisable for a period of ninety (90)
days following such termination of employment, and shall thereafter
terminate.
Notwithstanding the foregoing, the Committee may provide, either at the
time an Option is granted or thereafter, that the Option may be exercised after
the periods provided for in this Section 6(e), but in no event beyond the term
of the Option.
(f) Method of Exercise. The exercise of an Option shall be made only by a
written notice delivered to the Secretary of the Company at the Company's
principal executive office specifying the number of Shares to be purchased and
accompanied by payment therefor and otherwise in accordance with the Agreement
pursuant to which the Option was granted. The purchase price for any Shares
purchased pursuant to the exercise of an Option shall be paid in full upon such
exercise in cash, by check, or, at the discretion of the Committee and upon such
terms and conditions as the Committee shall approve, by transferring Shares to
the Company or by a cashless exercise procedure. Any Shares transferred to the
Company as payment of the purchase price under an Option shall be valued at
their Fair Market Value on the day preceding the date of exercise of such
Option. If requested by the Committee, the Optionee shall deliver the Agreement
evidencing the Option to the Secretary of the Company who shall endorse thereon
a notation of such exercise and return such Agreement to the Optionee. Not less
than 100 Shares may be purchased at any time upon the exercise of an Option
unless the number of Shares so purchased constitutes the total number of shares
then purchasable under the Option.
(g) Rights of Optionees. No optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) the Company shall
have issued and delivered the Shares to the Optionee and (iii) the Optionee's
name shall have been entered as a stockholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to the maximum
number and class of shares of stock with respect to which options may be granted
under the Plan, the number and class of shares of stock as to which Options have
been granted under the Plan, and the purchase price therefor, if applicable.
Notwithstanding the foregoing, in the event of a Change in Capitalization
involving a merger, consolidation, reorganization, change in control or similar
event, the following shall apply: (a) the survivor or acquiror, as the case may
be, (the "Buyer") shall have the right to assume the Options or replace the
Options by similar options to acquire the Buyer's stock, (b) the Company may
accelerate all Options on or before the closing of the Change in Capitalization
subject to the availability of a reasonable period of time for the Optionees to
exercise the Options, or (c) the Company may cash out the outstanding Options
based on the then fair market value of the Options.
(b) Any such adjustment in the Shares or other securities subject to
outstanding Incentive Stock Options (including any adjustments in the purchase
price) shall be made in such manner as not to constitute a modification as
defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
8. TERMINATION AND AMENDMENT OF THE PLAN. The Plan shall terminate on the
day preceding the tenth anniversary of its effective date, except with respect
to Options outstanding on such date, and no Options may be granted thereafter.
The Board may sooner terminate or amend the Plan at any time, and from time to
time; provided, however, that, except as provided in Section 7 hereof, no
amendment shall be effective unless approved by the stockholders of the Company
where stockholder approval of such amendment is required (a) to comply with Rule
16b-3 under the Exchange Act subsequent to the registration of a class of equity
securities of the Company under Section 12 of the Exchange Act or (b) to comply
with any other law, regulation or stock exchange rule. Except as provided in
Section 7 hereof, rights and obligations under any
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<PAGE> 15
Option granted before any amendment of the Plan shall not be adversely altered
or impaired by such amendment, except with the consent of the Optionee.
9. NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board shall
not be construed as amending, modifying or rescinding any previously approved
incentive arrangement or as creating any limitations on the power of the Board
to adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
10. LIMITATION OF LIABILITY. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
(a) give any person any right to be granted an Option other than at the
sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to Shares except a
specifically provided in the Plan;
(c) limit in any way the right of the Company to terminate the employment
of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or implied,
that the Company will employ any person in any particular position, at any
particular rate of compensation or for any particular period of time.
11. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
(a) This Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Utah
without giving effect to the choice of law principles thereof.
(b) The obligation of the Company to sell or deliver Shares with respect to
Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
(c) Subsequent to the registration of a class of equity securities of the
Company under Section 12 of the Exchange Act, any provisions of the Plan
inconsistent with Rule 16b-3 under the Exchange Act shall be inoperative and
shall not affect the validity of the Plan.
(d) Except as otherwise provided in Section 8, the Board may make such
changes as may be necessary or appropriate to comply with the rules and
regulations of any government authority or to obtain for Optionees granted
Incentive Stock Options, the tax benefits under the applicable provisions of the
Code and regulations promulgated thereunder.
(e) Each Option is subject to the requirement that, if at any time the
Committee determines, in its absolute discretion, that the listing, registration
or qualification of Shares issued pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification consent or approval has
been effected or obtained free of any conditions as acceptable to the Committee.
(f) In the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act and is no not otherwise exempt from such registration, such
Shares shall be restricted against transfer to the extent required by the
Securities Act or regulations thereunder, and the Committee may require an
Optionee receiving Shares pursuant to the Plan, as a condition precedent to
receipt of such Shares, to represent to the Company in writing that the Shares
acquired by such Optionee are acquired for investment only and not with a view
to distribution.
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12. MISCELLANEOUS.
(a) Multiple Agreements. The terms of each Option may differ from other
Options granted under the Plan at the same time, or at any other time. The
Committee may also grant more than one Option to a given Optionee during the
term of the Plan, either in addition to, or in substitution for, one or more
Options previously granted to that Optionee. The grant of multiple Options may
be evidenced by a single Agreement or multiple Agreements, as determined by the
Committee.
(b) Withholding of Taxes. The Company shall have the right to deduct from
any payment of cash to any Optionee an amount equal to the federal, state and
local income taxes and other amounts required by law to be withheld with respect
to any Option. Notwithstanding anything to the contrary contained herein, if an
Optionee is entitled to receive Shares upon exercise of an Option, the Company
shall have the right to require such Optionee, prior to the delivery of such
Shares, to pay to the Company the amount of any federal, state or local income
takes and other amounts which the Company is required by law to withhold. The
Agreement evidencing any Incentive Stock Options granted under this Plan shall
provide that if the Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or
Shares issued to such Optionee pursuant to such Optionee's exercise of the
Incentive Stock Option, and such disposition occurs within the two-year period
commencing on the day after the date of grant of such Option or within the one
year period commencing on the day after the sale or transfer of the Share or
Shares to the Optionee pursuant to the exercise of such Option, such Optionee
shall, within ten (10) days of such disposition, notify the Company thereof and
thereafter immediately deliver to the Company any amount of federal, state or
local income taxes and other amounts which the Company informs the Optionee the
Company is required to withhold.
(c) Designation of Beneficiary. Each Optionee may, with the consent of the
Committee, designate a person or persons to receive in event of such Optionee's
death, any Option or any amount of Shares payable pursuant thereto, to which
such Optionee would then be entitled. Such designation will be made upon forms
supplied by and delivered to the Company and may be revoked or changed in
writing. In the event of the death of an Optionee and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
Optionee's death, the Company shall deliver such Options and/or amounts payable
to the executor or administrator of the estate of the Optionee, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Options and/or amounts payable
to the spouse or to any one or more dependents or relatives of the Optionee, or
if no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
13. EFFECTIVE DATE. The effective date of the Plan is January 31, 1997.
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